Climate disclosures bill passed by Australian Senate

A bill requiring large and medium sized companies to report on their climate impacts passed the Australian Senate on 22 August. The law, largely driven by Treasurer Jim Chalmers and Minister for Climate Change and Energy, Chris Bowen, mandates these companies to report on climate-related risks and opportunities, as well as greenhouse gas emissions.

Treasurer Chalmers stated:

“These critical reforms provide investors and companies the clarity and certainty they need to support the net zero transformation and further strengthen Australia’s reputation as an attractive destination for international capital.”?

Mandatory climate disclosures are part of the government’s sustainable finance strategy, a three pillared strategy with the ultimate goal of reaching net zero. The three pillars include:

• Pillar 1: Improve transparency on climate and sustainability.
• Pillar 2: Financial system capabilities.
• Pillar 3: Australian Government leadership and engagement.?

Under the bill, climate reporting requirements will be in accordance with standards set by the IFRS Foundation’s International Sustainability Standards Board (ISSB). Under the initial draft, the legislation would apply to public companies and large proprietary companies required to provide audited annual financial reports to ASIC, starting with companies with over 500 employees, revenue over $500 million or assets over $1 billion. More, asset owners with over $5 billion will be included, followed two years later by medium-sized companies and smaller companies a year later.

The?Australian Accounting Standards Board (AASB)?is developing the internationally-aligned climate disclosure standards for Australian companies, and the Australian Auditing and Assurance Board (AUASB) is developing assurance standards for climate disclosures at the end of the year.

Overall, this legislation marks a significant step towards enhancing corporate accountability and advancing Australia’s commitment to global climate goals.